Basin Electric navigates supply and demand with new tariffs

As a trade war continues on the global stage, the imposition of tariffs by the Trump administration—particularly on steel, aluminum, and electrical components such as transformers—has led to higher material costs for electric utilities.

According to Jon Klein, Basin Electric’s vice president of Procurement, projects have remained on schedule, but in some cases the cooperative has spent more money for material goods because of supply and demand issues.

The cooperative has dealt with supply and demand issues for several years now, especially since the COVID-19 pandemic, but Klein says tariffs exacerbate the problem.

“During the pandemic, shipping and trucking weren’t moving like they should; there were a lot of restrictions throughout the world,” Klein said. “Then, high inflationary periods drove costs through the roof. In a lot of ways, the challenges we’ve faced during the past four years are tougher than the tariff discussion. That said, we need to be careful that our suppliers are not adding markups or charging us for things we shouldn’t be charged for.”

Some of the infrequent suppliers the cooperative works with have increased their costs by 5% to 7%, due to tariffs. “Of course, we make sure we push back on that,” he said. “We ask for specific receipts to make sure they were in fact charged a tariff.”

If tariffs were at a steady rate, Klein said it would be much easier to navigate the higher costs, but it’s tougher when they keep fluctuating. “We can plan for 10% or 20%,” he said, “but when it goes from 20% to 40% to 150% and back to 20%, it is challenging. But tariffs are an assessment, not a supply shortage. We must adjust to a new fee as part of the cost of business while minimizing as much as possible.”

Looking ahead, Klein said he expects more fluctuations with tariffs and, as such, anticipates that some suppliers might continue to “spread a little butter on top of the price,” meaning marking up material goods, perhaps at least 3% to 5%.

“It becomes similar to inflationary costs,” he said. “But we’ll continue to require receipts to prove actual costs for our members.” This step, he said, is being fiscally responsible so that electricity provided by Basin Electric remains affordable to its members. “We love our vendors, but we always must trust, then verify.”